## Facts

- Martinez received Social Security disability insurance benefits.
- After a continuing disability review, the agency terminated benefits on the ground that Martinez was no longer disabled.
- An ALJ upheld the termination, and the Appeals Council denied review, making the ALJ decision final.
- Martinez sought judicial review, arguing that termination of existing benefits required a showing of medical improvement rather than a de novo reassessment.
- While the case was pending, controlling circuit precedent adopted a medical-improvement requirement for terminations.
- Relying on that intervening precedent, the district court reversed the termination sua sponte and ordered reinstatement of benefits, making Martinez the prevailing party on the merits.
- Martinez moved for attorney’s fees under the Equal Access to Justice Act (EAJA), contending the government’s position lacked substantial justification.
- The district court denied fees, finding the government’s position substantially justified; Martinez appealed that denial.

## Issues

1. Whether the government’s position was “substantially justified” under EAJA when it litigated before controlling circuit precedent required a medical-improvement showing for termination of existing disability benefits.
2. Whether the district court erred in denying EAJA attorney’s fees despite Martinez’s ultimate success on the merits after an intervening change in controlling law.

## Decision

- The Tenth Circuit affirmed the denial of EAJA fees.
- The court held that the Secretary’s position was substantially justified because circuit law on the medical-improvement requirement was unsettled when the agency acted and when the litigation position was taken.
- The court rejected hindsight reasoning; later precedent did not retroactively make the government’s earlier position unreasonable.
- The court deferred to the district court’s substantial-justification determination and found no basis to disturb it.

## Legal Principles

- Under EAJA, a prevailing party receives fees unless the government shows its position was substantially justified or special circumstances make an award unjust.
- “Substantially justified” means the government’s position had a reasonable basis in law and fact and a reasonable connection between facts and legal theory; it need not be correct.
- The substantial-justification inquiry is assessed based on the time the government acted and litigated, not based on later doctrinal developments.
- A party may prevail on the merits yet be denied EAJA fees if the government’s position was reasonably defensible given the state of the law.

## Conclusion

The court affirmed denial of EAJA attorney’s fees because the government reasonably defended the benefits termination under an unsettled legal standard at the time, even though intervening precedent later required reinstatement and Martinez prevailed on the merits.


Martinez v. Sec'y of Health & Hum. Servs., 815 F.2d 1381 (10th Cir. 1987)